5G technology promises to deliver faster download speeds, a far more efficient use of the mobile spectrum and denser networks with fewer white spots. But to consumers, 5G means something altogether more exciting: the integration of innovative Internet of Things (IoT) products like connected cars, home security and wireless locators to help you find a lost pet or your house keys.

But one of the key questions on global tech, media and telecom investors' minds is: when will 5G services be launched across the globe? We at Morgan Stanley believe that China, Japan and South Korea will introduce 5G first, with the United States closely behind and Europe lagging.

China will likely be the leader for broad-scale implementation, since they are focused on sizeable IoT deployments (given widespread broadband deployments already). Korea and Japan will be next, as both are incentivized to rollout ahead of their Olympic events. The U.S. will likely begin deployment on a similar timeline to Asia, but ramp will be slower as use cases are more selective up front.

However, we believe that the European Telcos 5G launch will lag other countries and continents—probably for a number of years. There are a number of reasons why:

The 4G Cycle Is Still in Play

European Telcos believe that 4G still has plenty of road ahead, via new technologies such as LTE Advanced (effectively 4.5G) and MIMO. These new, more-advanced 4G networks can meet wireless consumers' rising capacity needs across Europe in the intervening years.

Returns on 4G

4G certainly hasn’t been a great financial success for European Telcos. Average monthly wireless spend has been in consistent decline since LTE was first rolled out in Europe in 2011 and 2012. The 4G precedent won't see European operators rush to 5G.

Regulatory Issues

The regulatory backdrop in European mobile remains unfavorable with ongoing regulatory headwinds from EC roaming, call termination and other measures.

Capex Concerns

European Telcos also do not feel financially flush. Large Telcos now face very significant fixed-line fibre investment programs. Many Telcos are also spending heavily on content, notably on football rights. Dividend payments also continue to consume over half of European Telco free cash flow generation.

Late Cycle Adoption

Operators in Europe will hope that by the time they get to a 5G rollout, new technology glitches will have been ironed out. Moreover, European Telcos will hope that Moore's Law—which states that computer power doubles every two years at the same cost—will have kicked in and 5G kit prices will have come down in the intervening years. Indeed, operators that were late rolling out 3G and 4G benefited from cheaper equipment prices, vis-a-vis what the technology leaders paid.

Overall, deployment to Europe will likely be slow given financial hurdles and lack of early data demand, but interest in not repeating some of the mistakes made with 4G (where carriers weren't able to make more money) remains high, likely meaning it will take a flushed out business case before seeing significant European investment.